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Oil Price Shocks and the U.S. Economy: Where Does the Asymmetry Originate?

Nathan S. Balke, Stephen P.A. Brown and Mine K. Yucel

Year: 2002
Volume: Volume23
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No3-2
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Abstract:
Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs, financial stress, and/or monetary policy may be possible explanations for the asymmetric response. This paper uses a near vector autoregressive model of the U.S. economy to examine where the asymmetry might originate. The analysis uses counterfactual experiments to determine that monetary policy alone cannot account for the asymmetry.



Fuel Subsidies, the Oil Market and the World Economy

Nathan S. Balke, Michael Plante, and Mine Yücel

Year: 2015
Volume: Volume 36
Number: Adelman Special Issue
DOI: 10.5547/01956574.36.SI1.nbal
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Abstract:
This paper studies the effects of oil producing countries' fuel subsidies on the oil market and the world economy. We identify 24 oil-producing countries with fuel subsidies with retail fuel prices that are about 34 percent of the world price. We construct a two-country model where one country represents the oil-exporting subsidizers and the second the oil-importing bloc, and calibrate the model to match recent data. We find that the removal of subsidies would reduce the world price of oil by six percent. The removal of subsidies is unambiguously welfare enhancing for the oil-importing countries. Removal of subsidies is welfare improving for the oil-exporting countries as well, in the baseline calibration. However, the optimal subsidy from the point of view of oil exporters is not zero, in general.





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